RBI proposes new guidelines for term money market, draft rules for govt securities trading

Mumbai: The Reserve Bank on Thursday proposed to further enhance the depth of participation and liquidity in the term money market segment, as well as expand the participant base.

Prudential limits in respect of outstanding lending transactions in the call, notice and term money markets should be decided by the participants with the approval of their Board, said the draft Master Direction - Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2026.

"In case of regulated entities, the prudential limits shall be within the regulatory framework of the exposure norms prescribed by the Department of Regulation of the Reserve Bank for the entity concerned," said the draft.

The RBI said an active-term money market, apart from providing an alternative funding avenue to the market participants, also helps in enhancing monetary policy transmission by creating a link between the overnight money market and longer-term interest rates.

The central bank has also issued a draft Master Direction - Reserve Bank of India (Secondary Market Transactions in Government Securities) Directions, 2026.

Secondary market transactions in government securities are undertaken in accordance with the instructions issued from time to time.

With an objective to enhance clarity, streamline compliance, and provide a single point of reference to all stakeholders, the draft Directions consolidate extant instructions for undertaking secondary market transactions in government securities, the RBI said.

The RBI has invited comments from banks, market participants, investors and other interested stakeholders on both the draft circulars by July 17, 2026.